Contract Act 1872 - MBA Sem-I
Contract Act 1872 - MBA Sem-I
Module-I
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Purpose of Indian Contract Act
CONTRACT
Promise or set of
Valid Consideration
Promises
PROMISE Sec 2(b) A proposal when accepted becomes a promise.
CONSIDERATION Price paid by the one party for the promise of the other. Technical
word meaning ‘QUID PRO QUO’ i.e. something in return
MEANING OF PROMISE
• According to Section 2(b)
– when the person to whom the proposal is made
signifies his assent thereto, the proposal is said to
be accepted.
– A proposal, when accepted, becomes a promise.
PROMISE
Offer/Proposal Acceptance
MEANING OF CONTRACT
CONTRACT
Promise or
Lawful
set of Promise - Where Rights and
Consideration
Obligations in a contract
are enforceable in the eyes
Offer Acceptance of the Court.
Contract
“All the contracts are agreement but all agreements are not 8
contract.”
ESSENTIAL ELEMENTS OF A VALID
CONTRACT (Section 10)
• Sec.2(a),
When one person signifies to another his willingness to
do or to abstain from doing anything to obtain the
assent of that either to such act or abstinence, he is said
to make a proposal.
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Rules governing offer
1. Offer must be capable of creating the legal relation
2. Offer must be certain, definite and not vague
3. Offer may be express or implied
4. Offer must be distinguished from an invitation to offer
5. Offer may be specific or general
6. Offer must be communicated to the person to whom it is
made
7. Offer must be made with a view to obtaining consent of the
offeree
8. An offer should not contain a term the non compliance of
which amounts to acceptance
9. Communication of Special terms
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LAPSE (Revocation) OF AN OFFER
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Rules governing acceptance
• Acceptance must be absolute and unqualified
• Acceptance must be communicated
• Mode and time of Acceptance
• Acceptance by conduct
• Conditional acceptance operates as rejection
of offer
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Consideration Sec 2(d)
“When, at the desire of the promisor, the
promisee or any other person has done or
abstained from doing, or does or abstains from
doing, or promises to do or to abstain from
doing, something, such act or abstinence or
promise is called a consideration for the
promise;”
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Rules governing consideration
• Consideration must move at the desire of the
promisor
• Consideration may move from the promisee or any
other person
» Chinnayya V. Rammayya (1987)
• Executed, Executory and past consideration
• Consideration need not be adequate(sec25)
• Consideration should be real, Must not be unlawful,
immoral or opposed to the public policy
• There must be mutuality(eg- charity)
• Should be more than promisee is already bound
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When consideration not necessary
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Capacity to contract
• Sec11: Every person is competent to contract who is
of age of majority according to the law to which he is
subject, who is of sound mind and is not disqualified
from contracting by any law to which he is subject.
“An agreement entered into by or with a minor is void ab initio.”
• Sec 12: A person is said to be of sound mind for the
purpose of making a contract if at the time when he
makes it he is capable of understanding it and of
forming a rational judgment so as to its effect upon
his interests.
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Position of Minor’s Agreement
• An agreement entered into by or with a minor is void
ab initio.
• Minor can be beneficiary
• Minor can always plead minority
• Ratification on attaining majority is not allowed
• Contract by a minor’s guardian
Persons disqualified from entering into a contract
• Alien enemy
• Foreign sovereigns and ambassadors
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Free consent
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• Coercion is committing or threatening to commit any act
forbidden by Indian Penal Code, or the unlawful detaining
or threatening to detain any property, to the prejudice of
any person whatever, with the intention of causing any
person to enter into an agreement.
• Undue Influence: When the relations subsisting between
the parties are such that one of the parties is in a position
to dominate the will of the other and uses that position to
obtain an unfair advantage over the other.
• Fraud: Fraud means and includes any of the following acts
committed by a party to a contract or with his connivance
or by his agent with intent to deceive another party thereto
or his agent, or to induce him to enter into the contract
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Lawful Consideration Or Object
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Types of Contract
On the basis of
On the basis of
On the basis of
Enforceability
Creation Execution
• Void
• Expressed • Executed
• Voidable
• Written • Executory
• Illegal
• oral
• Implied
• E-Contract
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On the Basis of Enforceability
VOID CONTRACT [SEC. 2(j)] A contract which ceases to be enforceable by law becomes void when
it ceases to be enforceable.
VOID AGREEMENT [SEC. An agreement which is not enforceable by law is said to be void. It is
2(g)] an agreement which cannot be enforced from the date when they
were made. It is void ab initio.
VOIDABLE CONTRACT An agreement, which is enforceable by law at the option of one more
[SEC. 2(i)] of the parties, but not at the option of the other (s) is a voidable
contract.
For example: - Mr. A, at knife - point, asks B to sell his scooter for Rs.
50. Mr. B gives consent. The agreement is voidable at the option of B,
whose consent is not free.
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Contracts: On the Basis of Creation
EXPRESS A contract which is created either by word spoken or written.
CONTRACT
Quasi These are the contracts, which are created neither by word
Contract spoken, nor written, nor by the conducts of the parties, but
(Sec 68- these are created by the law.
72) For example: - If ‘A’ leaves his goods at ‘B’’s shop by mistake,
then it is ‘B’’s duty to return the goods or to compensate the
price.
In fact, these contracts depend on the principle of the doctrine
of unjust enrichment.
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On the basis of Execution
Executed An executed contract is a contract in which both the parties have
Contract performed their obligation. This is a contract which has been
completed.
For example:- If ‘A’ agrees to sell his car to ‘B’ for Rs. 100000. The
contract is said to be executed if ‘A’ delivers car to ‘B’ and B pays
the price to ‘A’.
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Performance of Contracts: Sec 37
The parties to the contract must either perform or offer to
perform their respective promises unless such performance is
dispensed with or excused under the Indian Contract Act or any
other law.
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Discharge of Contracts:
A contract is said to be discharged or terminated when the rights
and obligations arising out of a contract are extinguished.
Rescission When parties to a contract agree to rescind it, the contract need
not be performed. In this case, only old contract is cancelled no
new contract is formed.
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Discharge of Contracts by impossibility:
A contract is deemed to have become impossible of
performance and thus void under the following circumstances:
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Misrepresentation: Mistake:
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Remedies for Breach of Contracts:
When a contract is broken, the injured party has several courses
of action open to him. The injured party may :
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